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ABA firmly believes it is the responsibility of state leaders to uniformly and fairly enforce sales tax laws by requiring all retailers—whether they operate online, in bricks-and-mortar stores, or a combination of both—to fulfill their obligation to collect sales tax. The move to level the playing field for Main Street is often referred to as e-fairness or sales tax fairness.
This is neither a new tax nor special treatment for independent bookstores—it is an equitable and uniform enforcement of existing state tax laws. Locally owned businesses have far greater positive economic impact on their communities and are largely responsible for our communities retaining their unique characteristics. To undercut them, by selectively deciding what laws to enforce and what laws to ignore, is simply wrong.
The Campaign for E-Fairness has been a long one, but it has been successful due to the outreach from booksellers and other Main Street independent retailers. Out of the 45 states that collect sales tax, 39 states plus the District of Columbia require Amazon, the leading online retailer, to collect and remit sales tax for orders in their states. This means that 90 percent of the population resides in states where Amazon collects, and given the size and scope of the Washington-based online retailer, this significantly helps level the playing field for most ABA members. Moreover, 13 of those 39 states have passed “affiliate nexus” laws that require all remote retailers that have a broad network of online affiliates in the state to collect and remit sales tax.
The trend is very clear, it is not a matter of if the remaining 6 states will level the playing field, it is a matter of when.
List of states where Amazon does and does not collect sales tax…
Amazon Does Not Collect
as of 1/23/17
States that do not collect sales tax:
- New Hampshire
What is E-Fairness (also called Sales Tax Fairness)?
E-Fairness, or sales tax fairness, calls for the equitable enforcement of existing state tax laws. Currently, bricks-and-mortar retailers are required to collect and remit sales tax on customer purchases, while in many states remote retailers are allowed to skirt their obligation to collect sales tax on behalf of the state. This places in-state retailers at a severe competitive disadvantage and has prompted a growing number of consumers to purchase online to avoid paying sales tax.
Tax laws in the 45 states that collect sales tax stipulate that when a retailer has any physical presence in the state, whether it is a retail store, warehouse, office, or sales agent, the company must collect and remit sales tax on purchases made by customers in those states. (Five states -- Alaska, Delaware, Montana, New Hampshire, and Oregon -- don't collect sales tax.)
The E-Fairness Map here shows that the number of states tackling e-fairness on their own continues to grow. Out of the 45 states that collect sales tax, 34 and the District of Columbia have taken action to recoup lost sales tax revenue (by passing a law and/or striking a deal with Amazon.com to collect), while 19 of those states have passed some form of e-fairness law. Click here to see the map!
Join ABA's Fight for E-Fairness!
While ABA has always felt that a federal e-fairness solution is the best way to level the playing field, given that efforts at the federal level are moving slowly, ABA has focused the bulk of its e-fairness efforts on the states. This move -- along with states’ desire to recoup lost sales tax revenue to shore up budget deficits and with the indefatigable help of indie booksellers and other Main Street retailers -- has resulted in 34 states and the District of Columbia now requiring Amazon, by far the most dominant online retailer, to collect and remit sales tax. In addition, 17 states have laws that require Amazon and other online giants to collect and remit.
We firmly believe that the more that states pass e-fairness bills, the more likely that federal congress will be forced to consider the issue. ABA is urging booksellers in Arkansas, Hawaii, Idaho, Maine, Mississippi, Missouri, New Mexico, Oklahoma, Rhode Island, Vermont, and Wyoming to take action and contact your legislators now.
E-Fairness tools can be found in ABA’s AdvoKit to help them in their e-fairness outreach efforts. E-mails, letters, phone calls, and visits with state and federal legislators (at their local district offices) have made a world of difference in bringing this important issue to the attention of elected officials. Let us know what their take on this issue is. If you are not sure how to get started, we invite you to reach out to ABA’s Director of Public Policy and Advocacy, David Grogan at firstname.lastname@example.org.
Does "e-fairness" call for new taxes?
No -- this is in no way an issue of a “new tax.” A customer making a purchase where sales tax is not collected still owes a “use tax.” Customers are required to pay this to the state, but only a small percentage of consumers actually do so. In reality, this is an issue of which party collects the tax, the retailer or the buyer. It is always easier and more efficient to collect sales tax at the point of sale, as use tax laws are very hard to enforce. However, in the absence of a sales tax fairness solution to level the playing field, a growing number of states are stepping up the enforcement of use tax laws, putting the onus on the customer to remit to the state or face a stressful audit. This is even more of an issue when one considers that many residents do not even know they owe a use tax and see the Internet as a type of “duty-free” shopping. All told, the end result is that in-state retailers lose business and the states lose much-needed tax revenue. Enforcing the sales tax law by requiring out-of-state online retailers to collect sales tax would bring about "e-fairness."
Why don’t states ask online retailers to collect the tax?
Many online retailers will point to a 1992 Supreme Court judgment, Quill Corp. v. North Dakota, to justify why they are not collecting sales tax in states where they believe they do not have a physical presence. The Quill decision states that it would be too burdensome for a company to collect sales tax in every state due to the complexity of various state and local sales tax systems. However, the past decade has seen an incredible evolution in technology, and today there are myriad software solutions that will allow all sizes of businesses to collect and remit in states.
Does ABA believe the federal government needs to pass the Sales Tax Fairness and Simplification Act in order to collect sales tax?
Though ABA supports sales tax fairness efforts at the state level, it has always stated its preference for a federal solution to the issue. Currently, there are two similar federal bills, the Marketplace Equity Act (H.R. 3179) in the U.S. House of Representatives, and the Marketplace Fairness Act (S.1832) in the Senate, that have tremendous momentum. These bills would give states the right – if they choose to do so – to require remote retailers to collect and remit sales tax in the state. Importantly both bills have small seller exemptions: In the Senate bill, a remote retailer with less than $500,000 in gross remote sales annually would be exempted, and in the House bill retailers with less than $1 million would be exempted. The Senate version of the bill also authorizes the Streamlined Sales and Use Tax Agreement.
What is the Streamlined Sales Tax Project?
The Streamlined Sales Tax Project (SSTP) is an effort created by state governments, with input from local governments and the private sector, to simplify and modernize sales and use tax collection and administration, making it much easier for online retailers to collect sales tax. Retailer participation in SSTP is voluntary, but as of mid-2012, some 1,000 businesses in the 21 participating states have agreed to collect sales tax on remote sales. Currently, 24 states are members of the SSTP.
So what is the "Streamlined Sales and Use Tax Agreement"?
The Streamlined Sales and Use Tax Agreement (SSUTA) is the official agreement made by states that are participating in SSTP. ABA supports SSUTA.
Isn't this call for online sales tax very unpopular with consumers?
For those consumers who believe this is a new tax, it is indeed unpopular, which is why education is such a key component to this advocacy effort. But dedicated bookseller advocacy – including op-ed pieces and Letters to the Editor – and the efforts of a wide range of trade associations, have resulted in a growing number of consumers understanding the issue much better.
Many consumers now see that, when states allow out-of-state businesses to pirate away dollars that normally would have been spent in-state, they are doing nothing less than helping to encumber their state's own economy. In the end, the state's citizens end up the big losers. Uncollected sales tax revenue translates into a funding shortfall for such essential services as schools and first responders. It is conceivable that some states and local jurisdictions will try to make up for that lost revenue by increasing property or school taxes, or both. The bottom line is that states will need to get the money from somewhere. Given the choice between another drastic property tax increase, or having online retailers follow the law and collect sales tax, most consumers would choose the latter.
What can booksellers do to help?
Write your U.S. Senators and Representatives and your state governor and let them know that you support the sales tax fairness bills currently under consideration in congress. ABA has created the “E-Fairness Action Kit (E-FACT)” to make this outreach easier.
Who can I talk to if I have further questions?
Please contact David Grogan, ABA director of public policy and advocacy, at 914-406-7562 or via e-mail at email@example.com.